US Housing Market Risk Report Reveals Potential Decline In Vulnerable States

Housing developmentPhoto by Michael Tuszynski on

IRVINE, CA — A new report by ATTOM highlights potential instability in various county-level housing markets across the United States. The study, focusing on home affordability, underwater mortgages, foreclosures, and unemployment rates, exposes those markets most at risk of decline. The highest concentrations of risk were found in California, New Jersey, and Illinois, with notable clusters in the New York City and Chicago areas.

Based on first quarter 2024 data, these states accounted for 34 of the 50 US counties most at risk, a pattern consistent with previous years. Six of the counties were in the Chicago area, five were in the New York City metropolitan area, and 14 were located in inland California.

In contrast, markets least likely to decline were scattered across the South and Midwest. The top three states sheltering these counties were Virginia, Wisconsin, and Tennessee.

The report, however, does not indicate immediate decline. “It’s more a measure of vulnerability gaps,” explains Rob Barber, CEO at ATTOM. According to Barber, some metropolitan areas, slowed down by a year’s worth of housing market stagnation, are better positioned to withstand potential downturns than others.

The report uses four parameters to determine risk: the percentage of homes facing possible foreclosure, the proportion of mortgage balances that exceeded estimated property values, the percentage of local wages needed for major home ownership expenses, and local unemployment rates.

The study hints at continued varying levels of risk across the country. Large areas of California, Chicago, and New York City remain more vulnerable. The 50 most at-risk counties included five in the New York City suburbs and 14 in California, among others.

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Residential properties facing foreclosure action in the first quarter of 2024 were more frequent in 44 of the 50 most at-risk counties. Unemployment rates were above 5% in 30, underlining the correlation between employment and housing market stability.

As for the least at-risk markets, these were widely distributed across the South and Midwest, with nine of the 50 “safest” counties in Virginia, seven in Wisconsin, and six more in Tennessee.

In these low-risk counties, major ownership costs required less than a third of average local wages in 28 of the 50 counties. Less than 5% of residential mortgages were underwater in 38 of these 50, and none had more than one in 1,000 residential properties facing possible foreclosure. Unemployment rates were below 4% in all 50 counties.

This analysis brings visibility to the resilience or vulnerability of housing markets across the US, helping both individuals and organizations make informed decisions about their real estate investments.

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